Herding Behavior Around US Macroeconomic Announcements

Abstract

This paper investigates the herding behavior of investors in 18 European countries around US macroeconomic announcements. By considering daily data from February 3, 2000 through July 31, 2011 and a large sample of US macroeconomic indicators, we find evidence that the intentional herding behavior intensity decreases when accounting for US macroeconomic news. The herding behavior is adopted intentionally in some European countries namely France, Switzerland and Portugal while spuriously in Greece. In addition to herding with their respective domestic markets, investors in the first three countries herd around some US macroeconomic announcements, suggesting that these investors reveal a somewhat spurious herding behavior. Findings support evidence that investors in Belgium, Finland and Ireland adopt rational investment decision making with regard to their respective domestic markets, but show pronounced herding behavior around US announcements mainly the case of Finland and Ireland.